Press Release May 24, 2011 24th Conference of the State Finance Secretaries The 24th Conference of the

State Finance Secretaries was held in the Reserve Bank of India at Mumbai today. Finance Secretaries of 18 States participated. Dr. D.Subbarao, Governor, Reserve Bank of India inaugurated the Conference. Smt. Sudha Pillai, Member Secretary, Planning Commission; Shri R. Gopalan, Secretary (Economic Affairs); Shri Sumit Bose, Secretary (Disinvestment) and Officer on Special Duty (Expenditure); Dr. Kaushik Basu, Chief Economic Adviser; Shri C.R.Sundaramurti, Controller General of Accounts (CGA); and Smt. Shyamala Gopinath, Dr. Subir Gokarn and Shri Anand Sinha, Deputy Governors and other senior officials of the Ministry of Finance, Comptroller and Auditor General of India (CAG) and RBI attended the Conference.

While inaugurating the Conference, the Governor mentioned that States are important stakeholders in inflation management as their contribution is important for addressing the supply side constraints by way of better management of public distribution system, improving productivity in agriculture and allied activities, reforms to the Agriculture Produce Marketing Committee (APMC) Acts and improving the infrastructure, such as, storage facilities. Regarding State market borrowings, he emphasised that there is need to improve efficiency in terms of better planning, robust cash management and adherence to the Fiscal Responsibility Legislation (FRL). Besides improving revenue collections through tax reforms, the States should also focus on expenditure management. On the issue of regulating micro finance institutions (MFIs), he referred to the implementation of the Malegam Committee Report. Going forward, the unincorporated MFIs would be regulated by the proposed central legislation uniformly across the states to avoid regulatory arbitrage and the incorporated MFIs by the Reserve Bank, as hitherto. He also emphasised on the need to improve the effectiveness of the State Level Bankers Committee (SLBC) and that one of the important items on its agenda should be financial inclusion and financial literacy. Here, the attempt should be to move from a target driven approach to more meaningful financial inclusion. He urged the State Governments to play a proactive role in the field of financial literacy and financial inclusion in collaboration

with the RBI, Central Government and the banks. He also underlined that the State Governments should guard against entities that raise funds from gullible public through dubious schemes. In todays deliberations, the focus was on management of cash balances and indicative market borrowings of the State Governments for 2011-12. Other issues discussed included repayment / exchange rate risk in States borrowing and building of sinking funds to meet these obligations, risks to State finances on account of power sector utilities, issues concerning regulation of MFIs, financial inclusion through business correspondents, roadmap for regulation of State Government owned NBFCs, switch over to electronic mode of payment and receipt for Governments banking business, and proposed classification structure of Union and State Governments accounts.